What is an HSA?
A Health Savings Account (HSA) can be a tool to help you manage healthcare expenses and reduce out-of-pocket costs. These personal savings accounts are available to individuals or families who are enrolled in an eligible High Deductible Health Plan (HDHP) and no other health plans. HSAs allow you to save pre-tax money to pay for qualified medical expenses, like doctor’s visits, prescription medication, ambulance costs, and more.
Why Should You Consider an HSA?
The unique benefits of an HSA make it an attractive option for those looking to manage healthcare costs.
- Tax Advantages: Contributions to your HSA are tax-deductible, which reduces your taxable income. You can invest the funds in your HSA, which grow tax free; and you don’t pay taxes on withdrawals used for qualified medical expenses.
- Flexibility: You decide how much to contribute (up to the IRS limits) and when to use the funds. There’s no “use-it-or-lose-it” rule, unlike a health care Flexible Spending Account (FSA); your money rolls over year after year.
- Portability: Unlike some other employer benefits, your HSA stays with you if you change jobs or health plans.
How Can You Use an HSA?
After setting up your account, usually through your employer, insurance provider, or a financial institution, you can contribute funds up to the annual limit. For 2025, the limits are $4,300 for individuals and $8,550 for families. Contributions from both you and your employer count towards the limit.
Use your HSA funds to pay for a wide range of healthcare expenses, including:
- Copayments and deductibles.
- Prescription medications.
- Eye care (including eye exams or prescription lenses)
- Dental treatments.
Keep all receipts and records of your expenses, as the IRS may request proof that the funds were used appropriately.
Long-Term Benefits of an HSA
An HSA isn’t just for immediate healthcare needs. Many people treat it as a long-term investment account for medical costs in retirement. Once you turn 65, you can even use HSA funds for non-medical expenses without penalties, although those withdrawals will be taxed as income.
If you’re enrolled in an high-deductible health plan, an HSA could be a smart addition to your financial and healthcare strategy. If you are eligible and are interested in learning more about HSAs, make an appointment with your employer or a tax professional.
This article is meant for informational purposes only. If you have questions or would like further information, make an appointment with your primary care provider.
